I believe it is a universal truth that taxes are never reduced or eliminated. In the year 2000, Brazil instituted a new tax called CIDE (acronym for “Contribution of Intervention in the Economic Domain”) which would be levied upon payments originated from contracts that foresee the remittance of royalties, of any nature, to beneficiaries outside Brazil. The purpose of the tax is to foment the technological development of the country. Basically 10% of everything that is remitted abroad under the denomination “royalties” would have to be collected.

But why am I addressing a 12-year old tax now?

Well, the reason is that, in 2002, a decree came out (no. 4,195) to regulate the CIDE law and, when defining the types of royalties upon which the tax would be levied, copyright was conspicuously left out. Therefore, this decree created a situation where it would be possible to allege that royalty remittances related to copyright would be outside the scope of the CIDE and that made many very happy.

In 2007, this matter was brought before the Contributor’s Council by Columbia Tristar Home Entertainment do Brasil Ltda. and the decision was that CIDE would not be applicable based on the interpretation of Decree no. 4,195/2002. It said and I quote: “The reading of the article above [referring to the Decree no. 4,195 and the finite list of what royalties encompass] does not allow any room to doubts, as the payment related to copyright to a resident or domiciled abroad, even if under the name royalties (…) will not lead to the application of CIDE”. This decision made many more even happier.

Cut to the present.

Just last month, the IRF’s appeal against the above decision was accepted and the 2007 decision was reversed. So far, this decision has not been made officially available. It seems that the tax-hungry government won this round and, to tell you the truth, I saw this coming based on the universal truth I mentioned in the beginning of this post. This will make a lot of people sad. I know I am sad. But the government will be very happy! Isn’t that nice?